Both production management and operations management (POM) are concerned with managing those resources of an enterprise that are required to produce the goods or services to be sold to consumers or other organizations. The term production management came first however the growth of service industries has brought with it the term operations management as a more appropriate general title.
In order to produce or provide goods/services to a required quality level, at an appropriate time and within acceptable financial constraints, the organization creates a number of functions. One key function is production/operations. POM task is concerned with the transformation process which takes inputs and converts them into outputs, together with various support functions closely associated with the basic task.
There are quite a number of key performance indicators than can be used to evaluate the POM performance. The choice depends on the size of the organization, nature of products/services involved, technology level embodied in the products/services and processes used within the production/operations function, the extend to which the products/services are made in-house, and etc.
Among the key performance indicators with financial perspective it is worth mentioning those that assess and compare loss and profit issues or whether the organization fits within acceptable financial constraints, for example, revenue, net profit, profit making orders, loss making orders, aggregated loss, etc. Regular measurements will allow for better understanding of financial side of production/operations activities, provide additional information required for organization change and investment decisions.
The quality of the internal processes may be assessed with the help of following indicators: equipment/facility availability, resources availability, scrap rate, operating hours rate, equipment/facility effective performance. All the above-mentioned indicators refer to the operations and indicate how the organization uses such resources as equipment, facilities, materials, components, spare parts, time and labor force. If regularly measured these ratios allow for corrections being made to internal process organization and for investment decisions.
POM key performance indicators with growth and development perspective deal with occupational health and safety and with training of personnel. They are AIF (all injury frequency), LWI (lost workday injury), RWI (restricted workday injury), MTC (medical treatment case), LWIF (lost workday injury frequency), LWIS (lost workday injury severity) and others. These ratios indicate whether the production/operations environment and processes are healthy and safe and whether there are opportunities for growth and development of the personnel.
The key performance indicators with customer perspective include number of complaints, delivery index, frequency of order backlog, service level percentage, number of backlog orders per month, and etc. All of them refer to customer perception and satisfaction with the organization, its products/services and thus may point to the problems in the internal processes resulting in loss of customers and subsequently in loss of profits. All of these indicators are easily calculated and do no require commissioning of special research.
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